Credit: Fadeaway World
Magic Johnson On How He Built 125 Starbucks For Urban America And The Urban Consumer
Magic Johnson is one of the greatest players in NBA history, but he is no slouch off the court either. Johnson is an incredibly successful businessman, and his story of how he built 125 successful Starbucks stores recently went viral.
"You would think that being Magic Johnson that people say, 'Oh, here's a lot of money.' and that wasn't the case," Johnson said. "Matter of fact, (being) Magic Johnson worked against me and they said, 'Oh, we want your picture and your autograph but we don't want to give you the money.'"
Johnson was turned down seven to eight times by various banks and eventually turned to pension funds.
"I wanted growth and sustainability," Johnson continued. "And the only way I could do that is to use other people's money. So, finally, I went up to Sacramento to the pension funds. They turned me down three years in a row. But finally the fourth year, CalPERS said, 'Okay, I believe in you, so I'mma give you $50 million and if you're successful with the $50 million, you can come back and get $100 more million.'"
With the money, Johnson bought a shopping center in the inner city for $22 million. It was 40% occupied and he took it to 100%, after which he sold it for $48 million.
"Took the $26 million profit up to Sacramento and they said, 'Oh, I guess you do know business.' So, that's what got me started," Johnson stated. "Then I was able to get access to capital."
With the capital now in hand, Johnson went to meet Howard Schultz, the then-CEO of Starbucks. The Hall of Fame point guard went into detail in another interview about how the conversation with Schultz went down, and how he changed his stores based on his consumer base.
"I said, 'Howard Schultz, minorities, we like coffee too,'" Johnson stated. "He said, 'Earvin we don't do franchisees.' I said, 'I'm not here to become one.' Imma put up half the money, you put up the half the money, let's build Starbucks in urban America."
The Board agreed and Johnson began the building of Starbucks stores in the inner cities.
"The headlines in the LA Times said no way minorities would pay $3 for a cup of coffee," Johnson continued. "We'll pay $3 for a cup of coffee, we quite don't know what scones are though. So I had to take the scones out of my Starbucks, put sweet potato pie in, pound cake, sock it to me cake, peach cobbler, pecan pie, things that resonate with the urban consumer."
Johnson also went away from the kind of music that was traditionally played in Starbucks stores and went with what his consumer base would like.
"So I had to take the Stones out of my Starbucks and put in the Weekend, Drake, Prince, Lionel Ritchie because the Stones wouldn't resonate with my customer base," Johnson continued. "... I put in things that minorities like and what am I telling you? Write this down. Know your customer... I tweaked my Starbucks to fit urban America and the urban consumer, that's why my per caps are so high, that's why I was able to build 125 Starbucks in over 40 cities."
Johnson had entered into this partnership in 1998 and would eventually sell his interest in the stores back to the company in 2010 for a reported $75 million in profit. Countless other successful business dealings like this are why Johnson officially joined the billionaire athletes club with Michael Jordan and LeBron James in 2023.
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